Absa: SA beef prices resilient

South African consumers are increasingly opting for more expensive cuts of beef, despite previous challenges with rising inflation and high interest rates. The shift towards beef, which is traditionally regarded as less affordable compared to chicken or tinned fish, indicates a changing trend in consumer preferences. To discuss the state of the beef industry and its outlook, CNBC Africa interviewed Marlene Louw, Senior Economist at Absa AgriBusiness. Louw expressed optimism for the industry, citing a breakdown in the correlation between low shedding and prices. Improved export prospects, particularly in markets like Saudi Arabia, have also contributed to the positive outlook. While this may not be great news for beef consumers as prices are expected to remain high, Louw mentioned that potential interest rate reductions could provide relief to consumers. One of the key opportunities for the South African beef industry lies in the Saudi Arabian market, which recently opened up for South African beef exports. While trade volumes have been limited so far, the competitive pricing of South African beef in Saudi Arabia positions the country well to tap into this market in the future. The anticipation is that volumes will increase over time, enhancing the export potential for South African beef. However, challenges such as the threat of El Niño pose risks to the industry. Increased input prices, particularly in yellow maize used as feed in the beef industry, could impact production costs. Louw highlighted the need for normalizing weather patterns to stabilize maize prices and ensure a more conducive environment for beef production. Looking ahead, Louw's price forecasts for beef indicate a continuing upward trend through 2026. While consumers may hope for relief from lower interest rates, producers are poised to capitalize on the selling opportunities. The industry is emerging from a herd rebuilding phase, with farmers expanding production in response to market signals. To ensure sustained growth, increasing exports will be crucial, with the potential to grow market share from 3% to 7 or even 10% in the medium term. Louw emphasized the importance of exploring export opportunities beyond Saudi Arabia, particularly in markets like China and the broader Middle East. With the cost competitiveness of South African beef compared to other exporting countries like Brazil and Australia, there is significant potential for growth in these markets. The weakening rand further enhances South Africa's position as an exporter. Overall, the South African beef industry is poised for growth, driven by shifting consumer preferences, export opportunities, and favorable market conditions. As producers respond to the rising demand and focus on expanding export markets, the industry is set to capitalize on the positive outlook for the years to come.